Harley-Davidson as proof of the effect of tariffs
Harley-Davidson is the oldest motorcycle brand in America and the Harley-Davidson logo, as well as motorcycles, have become iconic with American culture. So when the company bought itself back for 80 million dollars from a holding company called AMA in an attempt to save itself from Total brand failure Harley-Davidson turn to Ronald Reagan to help support what they call a brand evolution. President Ronald Reagan recognizing the weight of the Harley-Davidson name and in his words “how it stood for America and American culture itself” Fought to keep the brand from failing. At the time the main competitor of Harley-Davidson was Japanese motorcycle Brands such as Honda and Suzuki which were completely out competing Harley-Davidson in price and quality. In response, Ronald Reagan took the 4% import tax for Japanese motorcycles and increased it to 45%.
This massive increase in tariffs on the Japanese motorcycle Brands gave Harley-Davidson breathing room to rebuild their brand. But did it work? wall Harley-Davidson was once again able to gain traction inside the large high-end motorcycle Marketplace They never became competitive with Brands such as Honda are Suzuki to this day. Harley-Davidson sells roughly about 250,000 motorcycles every year compared to the 15 million that Honda sells annually they never fully recovered. But the question remains why didn't it work?
the answer lies in the fact that by putting such a high tariff on foreign imports Harley-Davidson was not incentivized to innovate. The main factor that put Suzuki and Honda so far ahead of Harley-Davidson was the fact that they were continuously innovating and designing new technology that put them ahead of the Curve. By essentially removing competition from Harley-Davidson they did not have to adapt to a competitive Marketplace. This example highlights one of the many faults with tariffs which is a removes incentives to innovate. As competition breeds innovation. some would argue that if Ronald Reagan had rather subsidized R&D for Harley-Davidson rather than remove their competition could they be a more competitive brand today. That question is harder to answer but the one that I believe is pretty clear here is that purely putting a terrorist on the Constitution does not guarantee the success of a brand.
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